Lone Star Lodging Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Lone Star Lodging Case Study Solution

Flexible Budget

A flexible budget is created by inserting each line item in the monthly budget. The flexible budget is calculated through multiplying the variable cost / unit by the actual volume of production. The available rooms and rented rooms are variables, which could be changed. Also the room rentals and revenue allowances are variables, because allowance could vary with performance. Apart from the housekeeper expense, payroll taxes, total supplies and total other expense, all of these expenses are fixed. It is because of the reason that the housekeepers would be paid in accordance with number of rooms cleaned. Also, the payroll taxes is variable because it is 8.5 percent of amount paid to employees. The total room revenue is favorable variance, because flexible budget is lower than the actual budget, whereas the total revenue is also favorable. The housekeeper expense, payroll taxes expense, total supplies and total other expenses are unfavorable variance. Furthermore, the flexible budgeted total expense of the company is lower than the actual budget, and the flexible budgeted profit for the year is higher than the actual profit, hence resulting in an unfavorable variance.

Conclusion

Based on the above analysis, it could be said that the company’s operational management is not working efficiently, as their variance are un favourable. The company’s actual expenses and costs are higher than its budgeted amounts, therefore the company should pay attention to its operations. The company needs to work efficiently and effectively to manage its investments, costs and expenses. As an addition to it, according to the analysis; the company’s profit’s variance is also un favourable because its actual profit is lower than its budgeted profit. Therefore, in the meeting they should discuss the ways by which they can overcome the cost management issues.

Appendix

	Budget	Actual	Variance/Difference	Favorable or Unfavorable
Rooms Available	45,990	45,990	–
Rooms Rented	27,376	25,435	1,941	Unfavorable
REVENUES
Room Rentals	1,200,138	1,136,619	63,519	Unfavorable
Revenue Allowance	(1,280)	(1,060)	(220)	Favorable
Total Room Revenue	1,198,858	1,135,559	63,299	Unfavorable
Internet Access	4,900	5,534	(634)	Favorable
Vouchers	5,000	1,262	3,738	Unfavorable
Laundry	1,310	1,240	70	Unfavorable
Vending	3,900	3,708	192	Unfavorable
Total Other	15,110	11,744	3,366	Unfavorable
TOTAL REVENUE	1,213,968	1,147,303	66,665	Unfavorable
EXPENSES
Total Front Office	100,800	109,523	(8,723)	Unfavorable
Total Housekeeping	100,816	104,782	(3,966)	Unfavorable
Total Other-Personnel Payroll	45,781	52,714	(6,933)	Unfavorable
Gross Payroll	247,397	267,019	(19,622)	Unfavorable
Total Benefits Expense	58,412	46,952	11,460	Favorable
Total Personnel Costs	305,809	313,971	(8,162)	Unfavorable
Total Supplies	26,007	38,063	(12,056)	Unfavorable
Total Travel and Meals	4,500	5,062	(562)	Unfavorable
Total Other Expense	16,768	17,912	(1,144)	Unfavorable
Other External Services	600	722	(122)	Unfavorable
Total Miscellaneous Operating Expenses	21,868	23,696	(1,828)	Unfavorable
Property Marketing	6,000	4,807	1,193	Favorable
Total Repair and Maintenance Expenses	46,720	52,552	(5,832)	Unfavorable
Electricity	42,000	36,144	5,856	Favorable
Natural Gas	16,800	13,428	3,372	Favorable
Water	33,000	21,919	11,081	Favorable
Total Energy	91,800	71,491	20,309	Favorable
Total Other Utilities	52,620	46,133	6,487	Favorable
TOTAL EXPENSES	550,824	550,713	111	Favorable
PROFIT	663,144	596,590	66,554	Unfavorable

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